Iraq, short on dollars, moves to purchases with Chinese yuan

BAGHDAD, Iraq: To compensate for a foreign currency shortage in local markets, Iraq’s central bank said the country could soon trade with China directly in yuan for the first time.

Earlier this month, the Iraqi cabinet approved a currency revaluation in response to a shortage of US dollars.

In an interview with Reuters this week, government economic adviser Mudhir Salih said, "It is the first time imports would be financed from China in yuan, as Iraqi imports from China have been financed in (US) dollars only."

The move highlights the gradual opening up of China’s financial markets and the yuan’s growing global influence, as many countries aim to diversify their currency exposures.

In a statement, the Iraqi central bank said that its plan could boost the balance in Iraqi banks that have accounts with Chinese banks in yuan.

It could also boost local banks’ balances through the central bank’s US dollar reserve accounts with JP Morgan and the Development Bank of Singapore, it added.

Salih said that the two banks could convert US dollars to yuan and pay beneficiaries in China.